Member Info for Strangerstill

As has been previously reported the environment for raising finance is difficult at present and the JV may well have felt the need to have a more robust feasibility study based on greater reserves to reduce the project risk and make the raising of finance easier and less costly as is commented ‘As a result, Zenit has now completed almost double the drilling metres that had been planned previously and successfully brought the programme to a close.’ There is also the fact that the winter in Turkey has been rather severe and thus the drilling programme has gone on longer than expected delaying the production of the final feasibility study.

Another factor that is delaying the project is the impact of Covid on the government administration in Turkey (not just the fact that it is very inefficient anyway) thus ‘Following the Environmental Impact Assessment, the necessary forestry permit applications were submitted and presently remain under review with the Government’.

These factors are beyond Ariana’s control, and we just have to be patient, the pot of gold at the end of the rainbow is still there it is just that the rainbow is longer than we hoped.

Like everyone else I am getting frustrated with the lack of progress with Tavsan and Venus Minerals however there are substantial headwinds for Ariana that explain the lack of progress. Kerim has stated that the winter in Turkey has been very hard which has delayed the drilling programmes in Turkey. There is also very substantial lack of appetite for raising funds for new projects and IPOs as detailed in the following report;

By Andres Gonzalez

MADRID, March 31 - European equity markets suffered their worst quarter in more than two decades at the
start of 2022 as economic worries were exacerbated by the war in Ukraine.

Proceeds from equity capital markets in Europe were $10.6 billion, down 83% from last year and the lowest figure since
2000 when the dotcom bubble burst, spooking investors for years, according Refinitiv data up to March 21.

While market turmoil has affected corporates worldwide, Europe has suffered the most, with proceeds from initial public
offerings (IPO) falling by 58% worldwide, compared to 88% in Europe. "From January onwards, the market has been dealing with the change in expectations towards interest rates, the conflict in Ukraine and the situation in Asia, with Covid-19 and the potential impact on supply chain," said Nick Koemtzopoulos, Head of EMEA Equity Capital Markets at Credit Suisse.

Companies including Swiss skin care firm Galderma, Spanish lender Ibercaja and warehouse management firm Mecalux postponed plans to tap investors' appetite due to the market uncertainty aggravated by the war in Ukraine.
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The March window was initially expected to generate a windfall for investment banks given a solid earnings season in
January and February following last year's record volumes.

In Europe, 2021 was the busiest year in terms of capital markets activity since 2014, with more than $257 billion raised
from about 1,300 deals, including IPOs, share sales, rights issues and equity-linked bonds.

Equity capital markets are a relevant source of revenues for global investment banks. In 2021, according to a report from
Keefe, Bruyete & Woods, equity capital markets contributed between 3 and 8% to the revenues of the main U.S. banks.

But inflation risks, already a concern for investors, were compounded by Russia's invasion of Ukraine in late February,
driving the Euro Stoxx 50 volatility index .V2TX close to 50, the highest level since February 2020, alarming investors.

Dealmakers typically advise against listing a company if the volatility index is trading above 25 points. Now it trades at 28
points, a similar level to December 2021.

In the first three months of 2022, just one European company ranked in the top 20 global ECM offerings: Var Energi AS's
VAR.OL IPO in Norway, which raised $865 million.

Johnpwh
Keep asking, it is obviously working.

Please keep asking nicely.

Ariana signed its Memorandum of Understanding with Ozaltin to expand the JV in November 2019. In December 2019 Ariana agreed to earn in a 50% stake with Venus Minerals If Ariana provided additional funding of €1.9mln between October 2020 and October 2022. It very much looks like the earn in was negotiated after Ariana had reached an initial agreement with Ozaltin and that the 50% earn in was dependent on Ariana having sufficient cash resources between October 2020 and October 2022, that is having the cash from Ozaltin. If Ariana had been progressing the development of Salinbas by itself I very much doubt that it would have had the cash for the Venus earn in as well as the progression of Salinbas.

As long as the funding is all loan funding then Ariana will not need to put any cash in, if there is an element of equity funding then Ariana will need to put cash into to the JV to maintain its equity share.

When the free ride on Salinbas was stated by Ariana I think that the meaning was that Ariana itself will have to raise no funding as this will be done through the JV and probably at better terms than Ariana could have got. Without Ozaltin and Ariana owning 100% of Salinbas Ariana would not have had $23 million in the bank, would not be paying a dividend, would have had to spend most of its free cash over the next couple of years getting Salinbas to the point of being able to be built and then would have had to find $100 million to build Salinbas. Arian would not own 50% of Venus minerals and my belief is that Salinbas would have taken longer to bring into production. Point take about the IPO, I do not know how much dilution there will be when Venus minerals raises funds to build the Cyprus mines.

I suppose that I am as frustrated as all investors in Ariana but the following facts must be considered.
Ariana effectively now has only 50% of the current gold mining operation that it had, however to develop Salinbas I suspect that Ariana would have had to form a JV with a Turkish partner and this would have resulted in considerable dilution at that point. As it is Ariana gets a free ride on the development of Salinbas albeit with only a 23.5% stake.
Ariana's future is not just dependent on Turkey as it now has 50% of Venus minerals in Cyprus which, hopefully, will provide income and profit in the next two years and considerably reduces the risk for Ariana.
So there are negatives to the formation of the JV with Ozaltin but this has enabled Ariana to develop its prospecting business and take a 50% stake in what should be a profitable venture in Cyprus.
Ariana was always going to be jam tomorrow even before Ozaltin but I suspect that the jar of jam will be much bigger, safer and will be developed faster than it would have without the enlarged JV even if we have a smaller proportion of the jar.

On 4 May 2021 Ariana’s SP was 5.1 pence and gold was £1,286.41 per oz.
Today Ariana’s SP is 3.55 down 25% (taking into account the dividend payment of 0.35 pence per share) and gold is £1,378.75 per oz up 7%.
In the meantime, there has been a consistent stream of good news from Ariana.
1st Feb 2022 7:00 am RNS RESOURCE AND RESERVE UPDATE: KIZILTEPE SECTOR
10th Dec 2021 7:00 am RNS ASGARD METALS FUND: PANTHER METALS SUCCESSFUL IPO
2nd Dec 2021 7:00 am RNS 240% INCREASE IN JORC RESOURCE AT KOKKINOYIA
1st Dec 2021 9:24 am RNS APLIKI PROJECT REVISED MINERAL RESOURCE ESTIMATE
8th Nov 2021 7:00 am RNS SUCCESSFUL DRILLING RESULTS FOR APLIKI, CYPRUS
27th Oct 2021 7:00 am RNS SIGNIFICANT GOLD AND ZINC ZONES AT KOKKINOYIA
14th Oct 2021 7:00 am RNS EIA APPROVED FOR TAVSAN GOLD-SILVER MINE IN TURKEY
12th Oct 2021 7:00 am RNS MAJOR NEW PROJECT & EARN-IN COMPLETION, CYPRUS
6th Oct 2021 7:00 am RNS SIGNIFICANT DRILLING RESULTS AT KOKKINOYIA, CYPRUS
16th Sep 2021 7:00 am RNS ADDITIONAL KEPEZ NORTH DRILLING RESULTS
19th Aug 2021 7:00 am RNS KARAKAVAK DRILLING RESULTS
17th Aug 2021 7:00 am RNS ARZU SOUTH DRILLING RESULTS
11th Aug 2021 7:00 am RNS ARZU CENTRAL DRILLING RESULTS
21st Jul 2021 7:00 am RNS SIGNIFICANT RESOURCE UPDATE: KEPEZ NORTH
7th Jul 2021 7:00 am RNS GOLD CONFIRMED AT KOKKINOYIA SECTOR, CYPRUS
30th Jun 2021 7:00 am RNS EXCELLENT KEPEZ NORTH DRILLING RESULTS
23rd Jun 2021 7:00 am RNS DERYA VEIN DRILLING RESULTS
18th May 2021 7:00 am RNS BANU VEIN DRILLING RESULTS
I do not understand the negative sentiment around Ariana. I know that the high inflation in Turkey is concerning but the JV converts the income it gets, which is at the current price of gold, into foreign currency holdings straight away such that the inflationary impact is negligible (as evidenced by the price that the JV gets for its gold sales in dollars). I also understand the concern about the apparent delay in the funding of Tavsan and the IPO of Venus but there are headwinds such as Covid and the situation in the Ukraine. Turkey is not under any real threat from the situation in the Ukraine and Ariana is in a good position in Turkey being part of a 76% Turkish owned JV. Turkey needs gold production to earn dollars and Ariana is part of a JV that is actively seeking to increase the production of gold.
Ariana is very undervalued, what will change the negative sentiment around Ariana?

I am a Rovers fan in exile in the Midlands but I hope that Burnley avoid the drop. They are a good Lancashire side, well managed and have punched above their weight for a long time. I wish you and all Burnley fans the best for the future. It would be great if the local derbies could happen again, that is as long as the Rovers win.

Keep the faith in the Claret and Blues and in Ariana.

I have two predictions that will have occurred by the end of June 2022
1 Tavsan will be fully funded, Venus’s IPO will be successful and Araina’s investment of £3 million will be seen as really good value, there will continue to be good news about reserves for the JV and Venus, Ariana’s year end results will be better than most people expect with a net profit of at least £4.5 million and a very health cash balance. People selling at todays price will be unhappy and people buying at todays price will be happy.
2 Blackburn Rovers will get promoted to the Premier League
I am confident about one of the predictions and if the other one comes true then I predict that the Rovers will get relegated in 2023.

I don’t think that the problem with Ariana is a lack of focus. From the very inception Ariana has been a prospecting company with a strategy of finding prospects and then going into partnership with other organisations to develop and run the mining operations. Ariana has an excellent track record in prospecting and Proccea is excellent at mining and processing, on top of that Ozaltin has the resources to be able to lever capital for future operations.
The real problem for me is that Ariana has never really communicated how the investment in prospecting is going to drive future shareholder value. Ariana gave up half of its profit stream from the JV to invest in prospecting and in new ventures, shareholders can easily calculate the reduction in profit from the reduced holding in the JV but are not able to calculate the increase in shareholder value from the prospecting business. What I want to know is what is the return from all the costs of the prospecting for the JV, we keep hearing about the increased reserves for the JV but how is this increasing profit for Ariana? Ariana has made a £3 million investment in Venus minerals but what is the forecast future value of its stake in Venus minerals?
I am certain that Ariana will make a lot of money in the future from its investment in prospecting, but I wish there was a bit more communication as to what the Board forecasts the potential increase in shareholder value is from the prospecting business.

Ganfeng own 19.9% of LAC so a major shareholder but not anywhere near enough to cause problems. Ganfeng own 46.7% of Cauchari-Olaroz but there are really good safeguards built into the JV agreement which would prevent Ganfeng from taking control or blocking any development unlike Sonora. LAC own 100% Thacker Pass in the USA. The US government will not allow Thacker Pass to become controlled by a Chinese company so Ganfeng are unlikely to be able to buy LAC on the cheap unlike Bacanora.

I am looking forward to the production of the Annual Report and full year results for 2021. At some point Ariana must get paid by Zenit for the prospecting work carried out on its behalf, bearing in mind that successful prospecting work is paid at 3 times cost there must be some additional profit recognised by Ariana over and above its share of profit from Zenit.

I sold out of Bacanora in August and invested in LAC, sold some LAC shares at a high and now hold £56,701 of LAC shares at a cost of £26,435. I feel sorry for all the investors who held on hoping for better things. The investors were totally screwed by the BOD who are employed to look after the investors interests.

By all means copy to ADVFN

Panmure Gordon’s analysis of Ariana Resources
Panmure Gordon has the following figures;
Sales 2022 E £5.6 million
2023 E £4.5 million
This forecast appears to be out of line with the analysis in the document.
Kiziltepe is forecast to produce 26,000 oz of gold in 2022 with that production level being maintained until at least 2025
Tavsan is forecast to come on stream in 2023 and is forecast to produce 8,400 oz of gold in 2023
Total production gold equivalent is given as 2022 31,200 oz 2023 40,000 oz
All in sustaining costs are given as 2022 $655 oz 2023 $704 oz
Gold price is given as 2022 $1,800 oz 2023 $1,650 oz
Therefore calculated profit would be 2022 $35.72 million 2023 $37.8 million
Ariana’s share of JV profit (23.5%) would be 2022 $8.39 2023 $8.88 million
This does not include any profit from Apliki which will be on stream by 2023.
These are back of fag packet calculations but it must be apparent that, using PG’s own figures, there should be an increase in sales revenue and profit between 2022 and 2023.
Also, in the valuation summary the net cash position is rolled into the valuation and then discounted for risk but the discount for risk on cash should be much less than the discount for risk on the value of the mining operation as there is little risk in holding cash except for inflation and the possibility of the banks going bust.
Panmure Gordon forecast that in 2023 the net cash position will be £14.6 million up 22.7% from £11.9 million in 2022 this is the equivalent of 1.3 pence per share. Ariana had £22.4 million in cash at 30/6/2021 and, if we disregard any cash inflow from the JV for dividends payable in 2021, the main cash flows will be the payment of the dividend at £7.5 million and the remaining buy in to Venus Minerals at £1.3 million (to bring the total to £3 million) so on that basis the cash forecast at 31/12/2021 should be around £13.6 million, PG have a forecast position of £8.9 million for 2021 which seems very low and obviously will affect the forecast net cash position and the valuation in 2023.
I really question the valuation provided by PG as it appears to contradict its own figures and the figures for cash held in the interim accounts of Ariana.

By the time the mine is built and operational Ariana will only have a 25% stake in the mine. Mind you it is still fantastic news. I see that the last price is 4.02 pence. Ariana is so undervalued it is untrue. Maybe if the Board came out with some truly bad news the share price might go up!!!!

My calculations indicate that Tavsan would be debt free before the end of the second year of operation so into good positive cash flow by 2025. I have always wondered why Ariana spread the special dividend over 2021/22 and 2022/23, is it because they intend to start paying a regular small dividend from 2023/24 when Tavsan and Apliki have been built and are operational and Kiziltepe is churning out profit and free cash flow. Also expect that the prospecting work being carried out will make some additional profit over the next couple of years. Kerim has stated that the intention is to start giving some value back to shareholders and a regular dividend would help. Am I being too hopeful, what do you think?

C1 cash costs include all direct costs of production, the main costs not included are loan repayments (cash flow not profit), interest payments (
p
rofit and cash flow) and depreciation (profit not cash flow). I took all these into account in the calculation as well as increasing the C1 cash costs and capital costs above those on Ariana's web site. As I said back of fag packet. Ariana will be publishing a feasibility study that will give a more definitive answer. I just want to point out that Tavsan is likely to make a positive impact on profit and cash flow fairly quickly. Ariana states that payback is forecast at 1.1 years.